Sustainable Business Strategies: Risk Management

2012 was the year in which risk management strategies to cope with sustainability mega forces became more sophisticated.

risk management

The lessons for corporate sustainability champions are:

  • Risk management for climate change and other environmental threats must become part of enterprise risk management.  If it isn’t, then you’re really in the minority.
    You need to make it a priority within your company.
  • Focus on business resilience, not just to extreme weather events that disrupt supply chains and operations, but also to the threat of resource constraints.
  • These risks vary considerably by industry. Find out what the risks are for your industry and company in particular. The field is moving fast in this area and risks are becoming more specific byindustry.

Corporate planners saw the writing on the wall this year. 83% of the S&P 500 is incorporating climate change into its business processes for managing enterprise-level risk. This concern with business resilience to climate change increased considerably in 2012, when 81% of companies identified physical risks from climate change, compared to 71% in 2011. That number is expected to go up in 2013.

After all, extreme weather events had accounted for 90% of all natural disasters last year, while total losses from natural disasters were estimated at $380 billion globally. Only a third of these losses were insured. 2012 is likely to break this record, with just one disaster, Hurricane Sandy, already clocking in at $50 billion in the US alone.

This growing evidence has resulted in more sophisticated analysis of business risks by industry sector. One of the best publicly available analysis summarizes the short and long-term physical and economic impacts of climate change on business sectors such as agriculture, food and beverage, apparel, electric power, mining, insurance, oil and gas, and tourism.